Lesotho, with a population of 2.3 million, is geographically surrounded by and economically integrated with South Africa, from which it receives approximately 80 percent of its imports for final consumption.  The World Bank classified Lesotho as a lower-middle income country.  In 2022, Lesotho registered a Gross Domestic Product (GDP) per capita of $41,045.  Approximately 49.7 percent of the population live below the poverty line and the unemployment rate is estimated at 25.3 percent.  Inflation dropped from an average of 8.7 percent in 2022 to 4.5 percent in July 2023.  Lesotho is one of the most unequal countries with a Gini coefficient of 0.541.  The government is the main player in the national economy as it is the largest employer.  While Lesotho is open to foreign investment and there are no economy wide-restrictions.  The private sector is at the nascent stage of development.  Lesotho enjoys ready access to the South African market.  The country follows World Trade Organization (WTO) laws and regulations in terms of free trade.  Lesotho is a member of regional economic blocks including the Southern African Customs Union (SACU), and as such, does not pay tariffs to export goods to other SACU members (Botswana, Namibia, South Africa, and Swaziland).  Except for Botswana, these countries also form a common currency and exchange control area known as the Common Monetary Area (CMA).  Within Lesotho, the South African rand can be used interchangeably with Lesotho’s currency, the loti since the loti is pegged one to one (1:1) to the South African rand.  The loti-rand peg provides some level of economic stability, and the government of Lesotho has a record of pursuing prudent macroeconomic policies.  Lesotho gets most of its foreign exchange through earnings from the SACU, water exports to South Africa, and, to a lesser extent, remittances from migrant laborers employed in South Africa.  The economy is mostly export driven as international trade makes up a large percentage of GDP makeup.  Lesotho is also a member of the Southern African Development Community (SADC) and joined the African Continental Free Trade Area in November 2020.  The major economic sectors are manufacturing, mining, agriculture, and services.  Major export products are garments, diamonds, water, electricity, wool, and mohair.  In the final year of its publication, the World Bank ranked Lesotho 122 among 190 countries in its 2020 Doing Business Report.

Political Environment

For background information on the political and economic environment of the country, please click on the link to the U.S. Department of State Countries & Areas website.